Chicago and red light vendor: Breaking up is hard to do

David Kidwell, Chicago Tribune reporter

Chicago's divorce with Redflex Traffic Systems is getting messy.

In his hurry to sever ties with the red-light camera operator amid a burgeoning bribery scandal, Mayor Rahm Emanuel in February set a six-month deadline for Redflex to leave town after a decadelong relationship that produced more than $300 million for City Hall and $100 million for the company.

But now Emanuel's office is backing away from the eviction date, extending the deadline indefinitely as officials work to untangle a complex series of thorny questions from eager suitors about how best to take over a 384-camera network that grew to become Redflex's largest North American program.

So while federal and local investigators examine allegations Redflex won its Chicago contract in a $2 million bribery scheme, the Emanuel administration is working with the company to try to ensure a transition to a new vendor won't interrupt the flow of ticket revenue — a stream of cash on which City Hall has come to rely. Redflex, now facing scrutiny across the country following disclosures prompted by a Tribune investigation, is under pressure to cooperate in its own exit from Chicago.

More than 100 questions from Redflex's potential successors have raised myriad concerns about how to satisfy the city's insistence on a seamless handoff — from where to obtain spare camera parts to how to unlock encrypted and proprietary software. Some even asked if they can hire Redflex as a subcontractor.

The answer from City Hall: an emphatic "No."

After what it describes as a "limited transition period," there will be no spare parts from Redflex, no software help, no maintenance contracts, the mayor's office said. "The one thing we are not open to is a continued relationship with Redflex," said Bill McCaffrey, an Emanuel spokesman.

Further complicating the transition is the fact that the administration of former Mayor Richard M. Daley opted to purchase outright the Redflex camera systems installed at 190 intersections around Chicago at a price tag of about $19 million. Redflex has earned the bulk of its money in Chicago operating and maintaining a camera network owned by taxpayers.

According to interviews and the city's responses to bidder questions, it is looking more likely the city will have to scrap that network and replace it with equipment from the new vendor. Potential bidders, who spoke only on the condition of anonymity because of the ongoing selection process, said starting from scratch with new equipment is the best option.

"It's clear to us that is the direction the city is going," said one red-light executive. "So that is what we intend to propose."

An executive of another potential bidder said the Redflex cameras are likely to be a multimillion dollar heap of shiny metal.

"Look, it's not like it can't be done. Of course we can figure out how to use their equipment," said the company executive. "But all things being equal, it would be much simpler — and preferable — just to use our own cameras. There are a lot of questions about how this might work."

Just how much a completely new system will cost the city depends on the bid proposals. The city moved the bid deadline from April 30 to Friday "in light of the number and complexity of questions."

The bribery scandal has also complicated Emanuel's plans to install automated speed cameras in school and park zones — an effort with the potential to dwarf the red-light program in size and revenue. The city had hoped to raise as much as $30 million in speeding-ticket revenue this year alone and Redflex officials had hoped to snag that contract as well.

One of the mayor's closest political allies, former campaign manager Greg Goldner, was working as a consultant to Redflex at the time Emanuel won legislative and City Council approval for speed cameras. The Tribune disclosed that as part of his efforts to promote Redflex around the country, Goldner hired the former city official who oversaw the red-light program since it began.

In a series of reports, the newspaper has raised questions about a much deeper relationship between Redflex and that manager, John Bills.

In addition to providing Bills with 17 vacation trips, the company has acknowledged paying $2 million to a consultant who is a longtime Bills friend — a relationship disclosed by the Tribune in October. Authorities will "likely" consider the consultant's payments part of a bribery scheme, according to an internal company investigation in February. Bills and his friend have denied any wrongdoing.

The disclosures have been devastating for the company.

The entire top management structure of Redflex was replaced. Emanuel initially banned the company from competing for his speed-camera initiative on grounds Redflex officials had kept the Bills allegations secret until the Tribune inquiries. In February, as the corruption allegations widened, the mayor declared the company would no longer be welcome in Chicago when its red-light contract expires in July.

The city had hoped to have speed cameras running earlier this year, but no deal has been signed. The city is still in negotiations with its top choice, one of Redflex's fiercest rivals, American Traffic Solutions Inc. ATS is also considering bidding to take over Redflex's red-light business.

Although the city has told potential bidders it hopes to make a selection by the end of July, the transition period is open ended. McCaffrey said the city is open to three options: buying all new red-light cameras from the new vendor, leasing the new vendor's equipment or figuring out a way for a new vendor to use Redflex's equipment without ongoing help or parts from Redflex.

The mayor's office rejected Tribune requests for an interview with city transportation officials to discuss the complications.

But an examination of the questions submitted by potential bidders, which include suburban-based RedSpeed Illinois, Maryland-based Xerox State & Local Solutions Inc. and Arizona-based ATS, illustrate some of the problems. Nearly half the questions centered on the potential pitfalls in taking over a competitor's program. They asked technical questions about decryption keys and transfer protocols. They also asked simpler questions about the availability of technical manuals and whether or not they would be allowed to purchase replacement parts from Redflex.

"The current vendor cannot perform services as a subcontractor for this project,'' the city responded. "After the transition period, there cannot be any relationship with the current vendor or any successor assignee to the current vendor without city authorization."

The city also said Redflex has agreed to provide training and a "translation program" for any new vendor seeking to marry its software with the Redflex network.

But the most likely scenario remains a total system replacement.

In that case, one potential vendor said the city might be able to offload its Redflex relics to an aftermarket buyer in Latin America.